PwC Issues Midyear Deals Report for US Health Services, Global Life Sciences, and Pharmaceutical Sectors

July 23, 2020

In 2 midyear deals reports issued today by PricewaterhouseCoopers (PwC), total US health services deal value and volume were down in the first half (H1) of 2020 compared with H1 2019, with overall global pharma and life sciences sectors also down in H1 2020 compared with the second half of 2019.

Health services deal activity slowed in the first half (H1) of 2020 by 3%, according to report findings issued today by PricewaterhouseCoopers (PwC). This was expected, as authors of the report, “US Health Services Deals Insights Mid-year 2020,” referenced the significant impact of the coronavirus disease 2019 (COVID-19) pandemic.

Although statistically lower, non-megadeal activity picked up in the second quarter (Q2) of 2020 by 8% compared with the first quarter, signaling growth amid challenges caused by COVID-19. Moreover, the researchers note that despite uncertainty and volatility in the market, there is continued interest in health services deals.

“For example, Thermo Fisher Scientific Inc. acquired QIAGEN N.V., in the sixth-largest deal since at least 2015. With this transaction, H1 2020 and H1 2019 appear alike in terms of megadeal activity (defined as greater than $5 billion),” said the study authors.

Notably, 2 subsectors grew year-over-year in H1 2020 compared with H1 2019. These sectors included other services (eg, medical office buildings, outpatient facilities, pharmacy-related services), which grew by 23%, and labs, MRI, and dialysis, which grew by 12%. Additionally, long-term care, the largest subsector since at least 2014, was again identified as the largest by deal volume, with 59 deals in Q2 2020 (30% of the quarter) and 158 deals in H1 2020 (33% of the year-to-date).

There was 1 megadeal in H1 2020, equal to that of H1 2019, and the largest deal in H1 2020 amounted to $11.5 billion vs $17.4 billion in H1 2019.

In looking ahead, the researchers note that there is cautious reason to think deal volumes could be sustained throughout 2020. “Most likely, deal volumes will be uneven for the remainder of 2020, as potential deal makers try to determine paths forward. In predeal diligence, buyers may need to disentangle targets’ short-term challenges from their longer-term strategic potential,” said the study authors.

Transitioning to the second report by PwC, “Global Pharma & Life Sciences (PLS) Deals Insights Mid-year 2020,” the researchers highlight that the PLS sector has experienced significant obstacles during 2020 due to a combination of economic, regulatory, political, and macroeconomic factors.

In comparison to 2019, H1 has brought only 2 megadeals in 2020 compared with 6 in H1 2019. When examining the 4 subsectors within PLS (pharmaceuticals, medical devices, biotech, and other/services), the biotech and medical devices subsectors both saw declines in deal volumes and values from the second half (H2) of 2019 to H1 2020. “Biotech experienced the biggest percentage drop in volumes whereas medical devices took the biggest hit to deal values,” expanded the study authors.

Conversely, the other/services subsector (eg, animal health, over-the-counter, and contract research organization/contract manufacturing organizations) saw increases in both deal volumes and values in H1 2020 over H2 2019, with the Thermo Fisher/QIAGEN transaction indicated as the major catalyst for the big increase in deal values.

For the pharmaceuticals subsector, deal values were down significantly by 56%, despite having an identical number of deals (41), between H2 2019 and H1 2020.

The researchers note that despite the significant declines in H1 2020, the potential for consolidation in certain subsectors remains high. “Buyers with strong balance sheets will begin to see opportunities to move their strategic agendas forward. We see potential for consolidation in the medical device/medtech subsector as companies look to adapt to a new world,” said Glenn Hunzinger, US PLS deals leader at PwC US.